Buyouts skew Indian drug industry

22nd February 2011

Tie-ups between Indian drug companies and multinational pharmaceutical firms, which initially received a lot of media attention, have proven to be more beneficial for big pharma than for Indian companies, according to a recent study.

The study authors found that co-operation between multinational pharmaceutical companies and Indian manufacturers had not boosted the R & D capacity of Indian pharmaceutical businesses.

They also found that there had not been any significant transfer of technology from developed countries.

In the report, Médicins Sans Frontières (MSF), a medical non-governmental organisation, describes India as the pharmacy of the developing world.

MSF relies on Indian companies to supply 80% of all generic HIV drugs it distributes abroad.

It is not the first time that Indian officials have begun to suspect that such co-operation between drug companies is ultimately not beneficial for Indians.

When a foreign firm buys an Indian drug company, that firm inheirits the intellectual property of the foreign company.

But quite often, the same Indian companies have already benefited from patent waivers on research done by Indian technical institutes, or from Indian tax incentives.

In essence, multinational firms are benefiting from previous investments of Indian taxpayers' money when they buy Indian drug companies.

Last year, the Indian commerce ministry said some analysts were concerned that foreign companies would steer Indian companies away from the Indian market, weakening competition and ultimately opening up a new price range for more expensive drugs, thus driving up prices overall.

The researchers found that clinical research organisations in India failed to raise their technological standards after being integrated with high-grossing pharmaceutical firms.

They found that most of the drug discovery efforts of such firms were aimed at Western markets.

While some Indian drug companies have also acquired foreign firms in the mean while, foreign firms have also bought Indian companies.

Study author Dinesh Abrol, of the National Institute of Science, Technology and Development Studies (NISTADS), said that buying domestic Indian companies would give multinational companies fewer challenges over proprietary technology.

He said that the buyouts would ultimately lead to decreased manufacturing capacity for Indian-made generic drugs.

The Indian commerce ministry said that alliances between local and global pharmaceutical companies had also been seen in Brazil, Egypt, and Pakistan.